Insurance risk

Insurance risk is the risk of loss or of adverse change in value of insurance liabilities, due to inadequate pricing and provisioning assumptions (in particular for technical provisions).

The objective of insurance risk management is to maintain insurance risk on an acceptable level and to limit potential loss from adverse change in the value of insurance liabilities.

Insurance risk measurement in PKO Życie Towarzystwo Ubezpieczeń SA is carried out as a part of contracts withdrawal analysis, claims analysis, analysis of assets covering technical provisions (APR) and annual analysis of shock scenarios – stress-tests, on the basis of methodology required by PFSA Office. Under the new Solvency II system applicable from 1 January 2016, PKO Życie Towarzystwo Ubezpieczeń SA had estimated the minimum capital requirement (MCR) and a standard capital requirement (SCR) at the end of third quarter of 2015 and prepared a report on prospective assessment of risk (forward looking assessment of own risk –FLAOR) in 2015. According to these analyses Towarzystwo forecasts total capital ratios in accordance with the Solvency II system at an adequate level.

As to mitigate the insurance risk exposure, PKO Życie Towarzystwo Ubezpieczeń SA uses i.e.:

  • reinsurance of risks (mortality, morbidity risks),
  • grace periods,
  • exemptions,
  • retention activities.

In case of the new products and risks, PKO Życie Towarzystwo Ubezpieczeń SA chooses a reinsurer, the range of protection, conditions of the reinsurance, changes in concluded reinsurance contracts and concluding new reinsurance contracts in relation to the newly introduced to offer or modified insurance products and new risks.